We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Michaels Companies (MIK) Reports Q1 Loss, Misses on Sales
Read MoreHide Full Article
The Michaels Companies, Inc. posted drab first-quarter fiscal 2020 results, wherein the bottom and top lines declined on a year-over-year basis. Results were negatively impacted by temporary store closures. Further, management refrained from issuing any guidance for fiscal 2020, citing unprecedented impacts of COVID-19.
However, the company has made significant transformations by enhancing digital and other omni-channel capabilities. Additionally, management is witnessing encouraging trends with the reopening of stores.
Q1 Numbers
Michaels’ adjusted loss was 43 cents per share whereas it reported adjusted earnings of 31 cents in the prior-year quarter. Also, the figure missed the Zacks Consensus Estimate of 10 cents. This downside can be mainly attributed to lower sales and margins, somewhat offset by a fall in SG&A expenses.
Net sales of this arts and crafts specialty retailer declined 26.9% year over year to $800 million and fell short of the Zacks Consensus Estimate of $956 million. Sales declined year over year due to temporary store closures stemming from the COVID-19 pandemic. Further, comparable store sales (comps) fell 27.6%. Since stores reopened in May, the company has witnessed solid demand, resulting in comps growth of 11%.
On the flip side, e-commerce surged significantly to $118.8 million, driven by new delivery options, including curbside pick-up, same-day delivery, expanded shipment from store and BOPIS as along with in-app purchases. This helped in providing some cushion to sales.
Gross profit declined 46.9% year over year to $221.8 million and gross margin contracted significantly to 27.7% from 38.2% in the last-year quarter. Lower gross margin can be attributed to deleverage in occupancy and distribution costs stemming from the ongoing pandemic along with higher tariffs and negative channel mix.
SG&A expenses, including pre-opening costs, decreased 14% to $281.3 million. As a percentage of sales, SG&A expenses, including pre-opening costs, increased 590 bps to 35.2%.
Adjusted operating loss was $60.4 million against adjusted operating income of $101.4 million in the prior-year quarter. This might be due to lower gross profit, somewhat offset by a decline in SG&A expenses.
The Michaels Companies, Inc. Price, Consensus and EPS Surprise
Michaels had cash and equivalents of $926.8 million, long-term debt of $2,639.1 million and total stockholders’ deficit of $1,515.4 million as of May 2, 2020. Total merchandise inventory inched up 0.8% to $1,110.8 million at the end of the quarter under review.
In March, the company withdrew $600 million from its revolving credit facility. Post the first quarter, it repaid debt of $300 million from the credit facility. This leaves it with sufficient liquidity for the near future. Going ahead, it anticipates utilizing this cash position to fund capital expenditures, working capital and debt.
Store Update
As of May 2, 2020, less than 500 stores were reopened. However, curbside pickup and ship from store facilities are being used for fulfillment by certain closed stores.
Meanwhile, the company highlighted that 1,000 stores reopened as of Jun 4, 2020. These stores are following the local health guidelines and further envision to reopen 1,273 stores by the end of June.
Looking Ahead
On May 14, Michaels revealed plans of closing its Darice wholesale operations. This move, which is expected to be concluded by Nov 30, came after the completion of a strategic review. The company further noted that it will keep the sourcing-related office in China and incur a cost of $46-$52 million.
In addition to this, the company has completed successful testing of its loyalty program and now expects to launch it later in fiscal 2020. Apart from these, management foresees positive cash flow in the second half of fiscal 2020.
Price Performance
We note that shares of this Zacks Rank #3 (Hold) company have gained 34.9% in the past three months compared with the industry’s growth of 10%.
Office Depot (ODP - Free Report) , also a Zacks Rank #2 stock, has an impressive long-term earnings growth rate of 6.8%.
Lowes Companies (LOW - Free Report) , which presently carries a Zacks Rank #2, has an expected long-term earnings growth rate of 15.2%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Michaels Companies (MIK) Reports Q1 Loss, Misses on Sales
The Michaels Companies, Inc. posted drab first-quarter fiscal 2020 results, wherein the bottom and top lines declined on a year-over-year basis. Results were negatively impacted by temporary store closures. Further, management refrained from issuing any guidance for fiscal 2020, citing unprecedented impacts of COVID-19.
However, the company has made significant transformations by enhancing digital and other omni-channel capabilities. Additionally, management is witnessing encouraging trends with the reopening of stores.
Q1 Numbers
Michaels’ adjusted loss was 43 cents per share whereas it reported adjusted earnings of 31 cents in the prior-year quarter. Also, the figure missed the Zacks Consensus Estimate of 10 cents. This downside can be mainly attributed to lower sales and margins, somewhat offset by a fall in SG&A expenses.
Net sales of this arts and crafts specialty retailer declined 26.9% year over year to $800 million and fell short of the Zacks Consensus Estimate of $956 million. Sales declined year over year due to temporary store closures stemming from the COVID-19 pandemic. Further, comparable store sales (comps) fell 27.6%. Since stores reopened in May, the company has witnessed solid demand, resulting in comps growth of 11%.
On the flip side, e-commerce surged significantly to $118.8 million, driven by new delivery options, including curbside pick-up, same-day delivery, expanded shipment from store and BOPIS as along with in-app purchases. This helped in providing some cushion to sales.
Gross profit declined 46.9% year over year to $221.8 million and gross margin contracted significantly to 27.7% from 38.2% in the last-year quarter. Lower gross margin can be attributed to deleverage in occupancy and distribution costs stemming from the ongoing pandemic along with higher tariffs and negative channel mix.
SG&A expenses, including pre-opening costs, decreased 14% to $281.3 million. As a percentage of sales, SG&A expenses, including pre-opening costs, increased 590 bps to 35.2%.
Adjusted operating loss was $60.4 million against adjusted operating income of $101.4 million in the prior-year quarter. This might be due to lower gross profit, somewhat offset by a decline in SG&A expenses.
The Michaels Companies, Inc. Price, Consensus and EPS Surprise
The Michaels Companies, Inc. price-consensus-eps-surprise-chart | The Michaels Companies, Inc. Quote
Financial Position
Michaels had cash and equivalents of $926.8 million, long-term debt of $2,639.1 million and total stockholders’ deficit of $1,515.4 million as of May 2, 2020. Total merchandise inventory inched up 0.8% to $1,110.8 million at the end of the quarter under review.
In March, the company withdrew $600 million from its revolving credit facility. Post the first quarter, it repaid debt of $300 million from the credit facility. This leaves it with sufficient liquidity for the near future. Going ahead, it anticipates utilizing this cash position to fund capital expenditures, working capital and debt.
Store Update
As of May 2, 2020, less than 500 stores were reopened. However, curbside pickup and ship from store facilities are being used for fulfillment by certain closed stores.
Meanwhile, the company highlighted that 1,000 stores reopened as of Jun 4, 2020. These stores are following the local health guidelines and further envision to reopen 1,273 stores by the end of June.
Looking Ahead
On May 14, Michaels revealed plans of closing its Darice wholesale operations. This move, which is expected to be concluded by Nov 30, came after the completion of a strategic review. The company further noted that it will keep the sourcing-related office in China and incur a cost of $46-$52 million.
In addition to this, the company has completed successful testing of its loyalty program and now expects to launch it later in fiscal 2020. Apart from these, management foresees positive cash flow in the second half of fiscal 2020.
Price Performance
We note that shares of this Zacks Rank #3 (Hold) company have gained 34.9% in the past three months compared with the industry’s growth of 10%.
3 Stocks to Consider
Tractor Supply Company (TSCO - Free Report) has an impressive long-term earnings growth rate of 12% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Office Depot (ODP - Free Report) , also a Zacks Rank #2 stock, has an impressive long-term earnings growth rate of 6.8%.
Lowes Companies (LOW - Free Report) , which presently carries a Zacks Rank #2, has an expected long-term earnings growth rate of 15.2%.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>